Friday, April 3, 2009

Newsmax recently reported that Bill O'Reilly says that he despises the way that the media treats President Barack H. Obama with kid gloves but that conservatives are wrong to call President Obama a socialist.

It may surprise Mr. O'Reilly to learn that by 1912 previouly Republican but by then Progressive Theodore Roosevelt's platform had become socialist. Roosevelt favored federal government price setting. Legislation authorizing the federal government's setting of railroad rates had been passed in 1906, during Roosevelt's Republican administration.

Similarly, President Obama has been busily bossing around automobile companies and providing trillions in subsidies to his cronies in investment banks like Goldman Sachs. The American approach to socialism of TR and BO has always been socialism of the rich.

Dictionary.com defines socialism is defined as "a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole". Would not firing the president of General Motors qualify as outright socialism?

Presidents Washington, Adams, Jefferson, Madison, Monroe and Jackson would have been shocked at the lumbering Leviathan government that Mr. O'Reilly and his colleagues at Fox favor. Jackson in particular would have been disturbed at Mr. O'Reilly's silence about the role of the socialist Federal Reserve Bank in bleeding and wrecking the American economy. As in Jackson's day, today's Fed is emblematic of American socialism for the rich.

In a recent discussion of libertarianism Mr. O'Reilly claimed that the government must focus on the "public good". But President Jefferson would not have agreed that bailouts, social security or welfare programs contribute to the public good. Not much has changed since. Today, the economic contribution of the majority of contributors to social security is less than the economic value of the benefits they will receive. Social security was a pyramid scheme that transferred wealth from the 21st to the 20th century. And the chief function of Mr. Obama's socialist government, as would have been in Jefferson's day had the Federalists and the Whigs had their way, is to steal from the public in the interest of subsidizing bankers, a policy that the socialist Obama administration and Mr. O'Reilly support.

The Chinese have embarrassed themselves. They believed that export-led growth was possible for a nation with a billion citizens. Export-led growth is fine for Japan or Korea, but China is so big that exports can account for only a small portion of the working population. Moreover, technological and scientific improvement limits the importance of labor-intensive industry. Export-led growth is fine to a point, but ultimately the comparative advantage of low labor costs needs to be surpassed by growth in human capital and technology, leading to competitive industry. With the largest potential market in the world, why would not China think in terms of developing the capacity to market internally? This would imply distributed growth, possibly based on the extent of export led growth that it has already experienced.

This would be accomplished through free market capitalist development whereby credit is widely distributed and entrepreneurship rewarded, free of taxation. The Chinese could accomplish this with a gold standard.

Instead, the Chinese allowed themselves to be suckered by Wall Street investment bankers and the US. The philosophical reason is likely this: the Chinese are still Marxists, and they believe that capitalism depends on exploitation. It seemed to them that in order to grow, their workers needed to be exploited. So they focused on low, exploitative labor costs. Then, they allowed Wall Street and its employees in the Fed and in Congress to convince them to invest in dollars, further reducing the cost of their exports. Thus, the Chinese have voluntarily cheated their workforce out of wages in order to subsidize American consumers and Wall Street.

Unfortunately for the United States, though, its public has been bamboozled into the same Wall Street scam: the advocacy of paper money expansion, high taxes and allocation of credit to foolish big business uses such as the Latin American debt crisis of the 1980s, Long Term Capital Management of the 1990s and the sub-prime bailout fiasco of the 2000's. This has led to a steady reduction in Americans' standard of living, a declining real hourly wage, as politically connected Wall Street opportunists make off with the cream of fresh Federal Reserve Bank reserves. The waste balloons larger as the "conservative"/"liberal" debate, better called the "Progressive"/"progressive" debate, grows ever more insipid, ever less relevant. American political debate has declined to the point where the news is communicated by bungling, drooling cretins who do not understand any of the issues.

Americans lack the intellectual curiosity or the motivation to question the Keynesian, pro-banker model. American politicians have squandered America's wealth on incompetently conceived and executed programs whose main purpose is to waste money. Americans do not raise an eyebrow that 50% of their earnings go to subsidize foolish government programs that produce value equal to 5% of their earnings. Americans are too busy watching "Entertainment Tonight" to care.

The Chinese have the potential to become the leading global power. They can achieve this by following common sense. Their call for a new currency was common sense. But they continue to be suckered by Keynesian double talk and lies. The new currency should be gold. It should be objective. It should not be subject to political manipulation as would a new paper currency. It should not be subject to the opinions of greedy bankers who do not know how to produce value.

I urge the Chinese to adopt the gold standard and the capitalist economic system. Capitalism does not mean exploitation. It means increasing wealth. When freed of the disruptions of paper money, it functions better than any other system.

Thursday, April 2, 2009

I was working out today and someone had turned on CNN. I was stunned that CNN was warning of an attack on the dollar and a dollar crash. This has been true for some time (I have been blogging about this for several years) but I was stunned that CNN is openly discussing this. China, Russia, the EU and other countries have denounced the Bush-Obama bailout and the massive stock market subsidy that the Bush-Obama administrations have effected. Moreover, CNN allowed a speaker to say that Obama would be a one-term president.

But why is CNN willing to cover this? CNN reflects establishment, and it is certainly in the establishment's interest to lie about the very shaky ground on which the American monetary and financial system rests.

I am back in the stock and gold markets. I got into the stock market at S&P 760 or so a few days before the 500 point run up about 8 days ago. I got into gold stocks and gold over the past few days.

Howard S. Katz's "conservative" portfolio is now only a few percent below its October 2007 level. I have fared worse on my own. My total accounts are down about 15% since October 2007. Katz is very bullish on gold stocks right now. He is also bullish on the stock market. I am close to 100% invested for the first time since 2005.

In the 1930s Franklin D. Roosevelt created an economic system based on virtually unlimited power on the part of financial interests, especially Wall Street and commercial banks. He did this by ending the gold standard and permitting an unrestricted fractional reserve approach whereby the Fed has unlimited power to expand the money supply. The Republicans jumped on board with this system in 1971 when Richard M. Nixon abolished the international gold standard that had been reintroduced in 1944.

In 2008 George W. Bush and in 2009 Barack H. Obama intensified the approach. Instead of government by banks, they introduced government by Goldman Sachs. The Secretary of Treasury under President Bush, Henry Paulson, was a former Goldman executive. Barack Obama received heavy contributions from Goldman. The Bush-Obama administration ensured that all of Goldman's debtors would receive considerable bailout money. Goldman Sachs is the nexus around which all the recipients of the bailouts revolve.

I am trying to figure out whether the US government is worth seriously discussing any more. I am also having trouble deciding whether the Republicans and Democrats have a grain of difference between them. American conservatives and American progressives have one allegiance: the corporate charter of Goldman Sachs.

Wednesday, April 1, 2009

In a senior seminar I have been teaching I introduce the students to some basic economics, namely that of Henry Hazlitt and Friedrich Hayek, and then discuss ideas about success in authors with varied ideological views such as Reinhard Bendix, David McClelland and David Riesman. We then discuss popular success literature including that of Benjamin Franklin, Elbert Hubbard, Dale Carnegie, Stephen Covey and Napoleon Hill. Then we analyze the character of Howard Roark in Ayn Rand's Fountainhead in light of economic, sociological and popular ideas about success.

If you haven't read Ayn Rand's novel, The Fountainhead, consider it. As good is her novel Atlas Shrugged. One point that students sometimes raise is whether Howard Roark is meant to be Frank Lloyd Wright. What are the similarities and differences between Howard Roark and the real life Frank Lloyd Wright?

Wright's architecture, such as that of the Edgar J. Kauffman residence, Falling Water pictured above, is unique. Wright's work lives up to Rand's euphoric descriptions of Howard Roark's. Like Roark, Wright left college without graduating (in the novel Roark is thrown out of architecture school, but Wright dropped out of the University of Wisconsin). From there, Roark goes directly to work for the Louis Sullivan character, Henry Cameron. Louis Sullivan was the real life architect who said "form follows function," which Rand attributes to Cameron on page 45 of the novel. The real life Wright went to work for the firm of J.L. Silsbee before going to work for Adler and Sullivan.

In the novel, Roark builds moderate income housing and invents new architectural forms and approaches in the Sullivan mode. According to the website:

"Wright evolved a new concept of interior space in architecture. Rejecting the existing view of rooms as single-function boxes, Wright created overlapping and interpenetrating rooms with shared spaces...Through experimentation, Wright developed the idea of the prairie house...

"...Wright responded to the need for low income housing with the Usonian house, a development from his earlier prairie house."

One quote from Wright on the site sounds something like something we might expect Roark to say:

"Our schools today, busy turning out 'the common man,' seem to be making conformity a law of his nature...and the old adage—'those who can, do, those who can't teach..'—was never more truly descriptive of purveyors of 'the higher education' in architecture. Life-long I have been shocked by the human deficiency capitalized by American education."

I think you will enjoy the photos at Great Buildings.com. Rand describes Roark's designs in a way that sounds like Wright's.

Like the fictional Roark, Wright built several temples and chapels, such as the Unity Temple in Oak Park Illinois and the Unitarian Meeting House in Madison, Wisconsin. However, unlike Roark, the temples were not destroyed by John Dewey or Lewis Mumford (in the novel Ellsworth Toohey, whose name rhymes with John Dewey but seems to be something like Lewis Mumford--an influential social and architectural critic who lived in the 1920s--has the Stoddard Temple reworked into a nursing home). Also, unlike Roark, Wright didn't build any New York City skyscrapers and did not live in New York City, which was Rand's adopted home. (Rand had emigrated from the USSR.) The only skyscrapers shown on the Great Buildings site are the Johnson Wax headquarters building in Racine, Wisconsin and the Price Tower in Bartlesville, Oklahoma. It is unfortunate that Wright did not design any of the major skyscrapers in New York City, although the Guggenheim Museum is ample testimony to Wright's imagination.

Several of these structures seem commonplace; recall that Wright designed them as early as 1904. Other architects have had more than a century to imitate Wright's designs, which look ultra-modern even today. Wright's work resonates with the triumph of the human spirit, but he was criticized for excessive individuality.

Tuesday, March 31, 2009

I just received this e-mail from Nancy Razik and Ralph Neil Doolin. I am going to try this on my class:

>An economics professor at Texas Tech said he had never failed a single student before but had, once, failed an entire class. The class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer. The professor then said ok, we will have an experiment in this class on socialism.

All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A. After the first test the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. But, as the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too; so they studied little.. The second Test average was a D! No one was happy. When the 3rd test rolled around the average was an F.

The scores never increased as bickering, blame, name calling all resulted in hard feelings and no one would study for anyone else. All failed to their great surprise and the professor told them that socialism would ultimately fail because the harder to succeed the greater the reward but when a government takes all the reward away; no one will try or succeed.

Nigel Ashford of the Institute for Humane Studies has sent me the following e-maill about a Free Trade Petition for academics:

>The Atlas Global Initiative for Free Trade, Peace and Prosperity is circulating an international petition in support of free trade available in over 20 languages. The petition will be launched on April 1 at the G20 summit in London. The organizers hope that academics of all disciplines will sign the petition to help avoid an era of harmful economic nationalism. For more details and to sign the petition, see the links below.

>The specter of protectionism is rising. It is always a dangerous and foolish policy, but it is especially dangerous at a time of economic crisis, when it threatens to damage the world economy. Protectionism’s peculiar premise is that national prosperity is increased when government grants monopoly power to domestic producers. As centuries of economic reasoning, historical experience, and empirical studies have repeatedly shown, that premise is dead wrong. Protectionism creates poverty, not prosperity. Protectionism doesn’t even “protect” domestic jobs or industries; it destroys them, by harming export industries and industries that rely on imports to make their goods. Raising the local prices of steel by “protecting” local steel companies just raises the cost of producing cars and the many other goods made with steel. Protectionism is a fool’s game.

>But the fact that protectionism destroys wealth is not its worst consequence. Protectionism destroys peace. That is justification enough for all people of good will, all friends of civilization, to speak out loudly and forcefully against economic nationalism, an ideology of conflict, based on ignorance and carried into practice by protectionism.

>Two hundred and fifty years ago, Montesquieu observed that “Peace is the natural effect of trade. Two nations who differ with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities.”

>Trade’s most valuable product is peace. Trade promotes peace, in part, by uniting different peoples in a common culture of commerce – a daily process of learning others’ languages, social norms, laws, expectations, wants, and talents.

>Trade promotes peace by encouraging people to build bonds of mutually beneficial cooperation. Just as trade unites the economic interests of Paris and Lyon, of Boston and Seattle, of Calcutta and Mumbai, trade also unites the economic interests of Paris and Portland, of Boston and Berlin, of Calcutta and Copenhagen – of the peoples of all nations who trade with each other.

>A great deal of rigorous empirical research supports the proposition that trade promotes peace.

>Perhaps the most tragic example of what happens when that insight is ignored is World War II.

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Mitchell Langbert

About Me

I have researched and written about employee benefit issues and in my previous life was a corporate benefits administrator. I am currently associate professor of business at Brooklyn College. I hold a Ph.D. from the Columbia University Graduate School of Business, an MBA from UCLA and an AB from Sarah Lawrence College. I am working on a project involving public policy. I blog on academic and political topics.